As recent interest rate cuts in Canada and the U.S. have boosted investor sentiment, the TSX Composite has been hitting record highs in 2024. This market surge has brought plenty of opportunities, especially for investors looking in the financial sector. Canadian bank stocks, which are known for their stability and strong dividends, offer some great options — especially when you don’t want to shell out a fortune to start building your portfolio.
Even with less than $500, you can own shares of two no-brainer Canadian bank stocks that offer attractive dividend yields and could benefit from a recovering economy as interest rates decline. Let’s take a closer look.
Canadian Imperial Bank of Commerce stock
Canadian Imperial Bank of Commerce (TSX:CM), or CIBC, is the first bank stock on this list that you can buy for under $500. With its solid 31% year-to-date gains, CIBC is currently the top-performing stock among Canada’s five largest banks. It currently trades at $83.88 per share with a market cap of $79.4 billion. The bank distributes its dividend payouts every quarter and offers a 4.3% annualized dividend yield at the current market price.
Now, let’s turn to the numbers. CIBC’s strong performance in the third quarter (ended in July) of its fiscal year 2024 showcases why it’s a solid choice for investors. During the quarter, its total revenue rose 12.9% YoY (year-over-year) to $6.6 billion with the help of consistent growth across its core business segments. The bank’s adjusted earnings saw a robust increase of 27% from a year ago, reaching $1.93 per share with lower credit losses and higher revenue.
Despite facing higher expenses related to performance-based compensation and strategic initiatives, CIBC’s core operations have remained resilient. Going forward, its net interest margins are likely to benefit from falling interest rates, which should further boost its profitability in the quarters to come, making it an attractive stock to buy now.
TD Bank stock
Unlike CIBC, shares of Toronto-Dominion Bank (TSX:TD) have dipped 8.3% so far in 2024 to currently trade at $78.48 per share with a market cap of $137.4 billion. This negative movement in TD Bank stock, however, has driven its dividend yield higher, making it an even more appealing buy for dividend-focused investors. At this market price, it has a strong 5.2% annualized dividend yield.
The weakness in TD stock could be attributed to the recent resolution of a major U.S. anti-money laundering (AML) investigation. According to the terms of the resolution, the Canadian bank agreed to pay about US$3.1 billion in penalties related to failures in its U.S. AML program, which had been under investigation for several years. While this hefty settlement has certainly weighed on the stock, it’s worth noting that the majority of the cost was already provisioned, meaning it might not dramatically affect the bank’s financial standing in the long run.
Moreover, TD Bank’s strong presence in both Canada and the U.S., along with its diversified business model across retail banking, wealth management, and capital markets, positions it well for long-term growth. With a solid capital position and a commitment to strengthening its operations, the recent dip in its share price could be a rare opportunity for long-term investors to buy this top Canadian bank at a bargain.
